Investor Lawyers Blog

JP Morgan Settles Broker Fraud Claim for $14M

Published on: September 20, 2019 | by Shepherd Smith Edwards & Kantas, LLP

JP Morgan Securities (JPM) agreed to pay $14M to a claimant who accused its former broker Antoine Souma of misconduct that allegedly led to $20M in net losses. According to Advisor Hub, Souma, who is based in Los Angeles, was named in Barron’s 2016 Top 100 Financial Adviser list. He is currently a Morgan Stanley (MS) broker. He “vehemently denies” the allegations made in this investor fraud claim.

The claimant, Ziad Gandour, is the founder of industrial construction management company TI Capital. He accused Souma of the following:

Fraud

Shepherd Smith Edwards and Kantas Wins $550K for Texas Widow Against UBS

Published on: September 18, 2019 | by Shepherd Smith Edwards & Kantas, LLP

A Financial Industry Regulatory Authority panel (FINRA) has awarded one of our clients, a 91-year-old widow, $550K in her Texas broker-dealer fraud case against UBS Financial Services (UBS). The claimant, who is from Texas, contends in her Houston senior investor fraud case that because her UBS broker made unsuitable investments on her behalf, she lost hundreds of thousands of dollars in her retirement accounts.

While the FINRA arbitration award doesn’t name the broker, Shepherd Smith Edwards and Kantas lawyer David Miller identified him as former UBS broker William Andrew Hightower. Attorney Miller said that Hightower, who headed up Hightower Capital Group, recommended that the claimant invest in leveraged and inverse exchange traded products and structured products, as well as his own private investments. These investments were not suitable for her.

Hightower is now accused of operating a $10M Ponzi fraud. Among the unsuitable investments that he made on our client’s behalf were those involving private placements Reproductive Research Technologies and Isospec Technologies, which were part of his alleged scam, and one fake private annuity.

Investor Files GPB Private Placement Claim Against Kalos Capital

Published on: September 16, 2019 | by Shepherd Smith Edwards & Kantas, LLP

A Tennessee investor is pursuing a Financial Industry Regulatory Authority (FINRA) arbitration claim against Kalos Capital, Inc. and its broker Martin Hunter McFarlin for the more than $100K in losses that he sustained from investing in non-traded real estate investment trusts (non-traded REITs) and the GPB Capital Automotive Portfolio. Now, the claimant is alleging omissions, misrepresentations, gross lack of supervision, unsuitable recommendations, and due diligence failures. Shepherd Smith Edwards and Kantas, LLP (SSEK Law Firm) is representing this individual in his case against Kalos and McFarlin.

Our client is a divorced dad, a small business owner, and an unsophisticated investor, which is why he turned to McFarlin and Kalos several years ago to help him invest his retirement money for him and his family. During seminars and company Christmas parties, the claimant was told that private placements were safe alternative investments.

Private Placements Are Risky Investments

Investor’s GPB Private Placement Claim Against Arkadios Capital Gets FINRA Hearing

Published on: September 13, 2019 | by Shepherd Smith Edwards & Kantas, LLP

An investor who filed an arbitration claim against Arkadios Capital for selling her GPB Capital Holdings private placements now has a hearing date set before a Financial Industry Regulatory Authority (FINRA) panel: April 20, 2020. This is one of the first GPB investor fraud case brought against a brokerage firm to get a hearing scheduled before one of the self-regulatory authority’s (SRO) arbitrators. Our broker fraud lawyers at Shepherd Smith Edwards and Kantas, LLP (SSEK Law Firm) are representing this claimant.

The investor, who is a woman from the greater Atlanta, Georgia area, is claiming hundreds of thousands of dollars in retirement fund losses after her financial adviser, an Arkadios broker, recommended the GPB securities to her. While with the broker-dealer, her portfolio became especially concentrated in private placements, including the GPB Holdings II Limited Partnership. Now, the claimant is contending that this GPB investment, in particular, was an extremely unsuitable recommendation for her, especially since it involved her IRA from which no losses can be offset.

Our client maintains that she was not aware of the risks involved in the investment strategy used by her Arkadios broker. She is alleging unsuitable recommendations, omissions, misrepresentations, gross negligence, due diligence failures, breach of fiduciary duty, negligence, and inadequate supervision. The investor is seeking damages, interest, and costs.

Ex-Cetera Broker from Texas is Accused of Defrauding Investors

Published on: September 13, 2019 | by Shepherd Smith Edwards & Kantas, LLP

If former Cetera Advisers broker James Christopher Hayne has handled your investments and you suffered investment losses that you suspect were due to fraud or negligence, you should speak with an experienced stockbroker fraud law firm right away. Over the years, Hayne, a Texas broker, has been named in numerous customer arbitration claims brought before the Financial Industry Regulatory Authority (FINRA).

With 17 years in the industry, Hayne, previously was a registered broker with Questar Capital, First Allied Securities, Edward Jones, and Morgan Stanley. His BrokerCheck record shows nine customer disputes, five of which were settled.

Most recently, there was the Financial Industry Regulatory Authority claim brought against Hayne by a customer that was resolved for $325K. The former client had requested $100K in damages. In that investor fraud case, Hayne was accused of violating both the Texas Securities Act and California Corporate Securities Law, breaching contractual duties to the claimant, negligence in the way he handled the latter’s account, and causing the customer to suffer investment losses.

American Realty Capital Properties to Pay Investors $1B

Published on: September 12, 2019 | by Shepherd Smith Edwards & Kantas, LLP

Nicholas Schorsch’s former real estate investment trust (REIT) American Realty Capital Properties Inc. (ARCP) has arrived at a $1B settlement with investors who sued over the company’s accounting scandal that led to inflated financial results five years ago. Now called Vereit, the REIT will pay $738.5M of the class action securities fraud settlement, while Schorsch’s American Realty Capital (AR Capital) will pay $225M. American Realty Capital Property’s ex-CFO Brian Block will pay $12.5M of the settlement. Meantime, Grant Thornton, the firm’s auditor during the period of the scandal, will pay $49M.

American Realty Capital Properties admitted to a $23M accounting error in late 2014. After ARCP restated its financials, investors sold their shares, causing a $3B drop in the REIT’s value. At one point, ARCP held $20B in assets.

Investors sued, accusing the REIT of incorrectly stating financials so as to spur acquisitions and inflate financial results. Two years ago, Block pleaded guilty to securities fraud related to the accounting misstatements.

Ex-Morgan Stanley Broker Pleads Guilty to Investment Adviser Fraud

Published on: September 10, 2019 | by Shepherd Smith Edwards & Kantas, LLP

A Former Morgan Stanley (MS) broker who was barred by the Financial Industry Regulatory Authority (FINRA) last year has pleaded guilty to defrauding his clients of hundreds of thousands of dollars. Elias Herbert Hafen was a registered Morgan Stanley rep. from 2009 until 2018 and then briefly went to work for Wells Fargo Clearing Services. According to his BrokerCheck record, Wells Fargo (WFC) fired him after just several months because he had financial agreements with clients that the firm never approved.

A news release of Hafen’s guilty plea on Justice.gov states that between 2013 and 2018, Hafen defrauded at least 11 financial advisory clients by fooling them into thinking he was able to access a high yield investment fund that came with guaranteed investment returns. This fund, however, was not affiliated with the investment bank where Hafen was a registered broker. In fact, it did not exist.

Because of Hafen’s investment advice, a number of his clients moved hundreds of thousands of dollars to his own bank account, from where he was supposed to invest in the fund. Instead, he generated fake bank statements using the name of an investment company that didn’t exist and, rather than use investors’ funds as intended, Hafen spent their money to fund his luxury lifestyle.

Cetera Advisors Accused of Defrauding Investors of $10M

Published on: September 7, 2019 | by Shepherd Smith Edwards & Kantas, LLP

The US Securities and Exchange Commission (SEC) has filed civil charges accusing Cetera Advisors of defrauding its retail clients through $10M in unnecessary commissions and fees. The regulator is accusing the registered investment adviser (RIA) of selling these customers costlier share classes even though they qualified to invest in less expensive share classes of the same funds. The clients paid the additional compensation to the firm during the time that they held the more costly investments.

According to the Commission’s complaint, from at least 9/2016 through 12/2016, these Cetera customers were invested and held in mutual fund share classes that charged them 12b-1 fees that were recurring instead of shares that didn’t charge these fees. The SEC said that aside from the fees, which was compensation paid to Cetera, the share classes were identical.

The regulator also claims that Cetera took part in a program with its clearing firm in which the latter would share service fees and revenues it was paid from certain mutual funds with the RIA. Hence, this was incentive for Cetera to sell these mutual funds instead of other investments to clients. Cetera purportedly received $1.7M as a result of this deal.

Cambridge Capital Accused of Defrauding Retired NFL Athletes

Published on: September 6, 2019 | by Shepherd Smith Edwards & Kantas, LLP

Cambridge Capital Group Advisors, its president Phillip Timothy Howard, and previously barred investment adviser Don Warner Reinhard are now the subject of a Securities and Exchange Commission (SEC) case accusing them of defrauding 20 investors, the majority of whom are retired National Football League players. Howard, who is also an attorney, represented the NFL retirees in a class action lawsuit over brain injuries they sustained while playing the game.

The investors invested about $4.1M in two proprietary hedge funds, the Cambridge Capital Partners and Cambridge Capital Group Equity Options Opportunities. According to the SEC, even though Howard knew that the former NFL players whom he represented lack proper brain function, employment capacity, credit, or capital, he and Reinhard still allegedly persuaded them to invest in the two funds. The regulator said that more than half of players who invested used their retirement money.

Among the false claims and misrepresentations that the defendants allegedly made while soliciting investors were that:

Philadelphia-Based Investment Adviser Accused of $105M Investor Fraud

Published on: September 5, 2019 | by Shepherd Smith Edwards & Kantas, LLP

Investment adviser Brenda Smith has been arrested and charged with defrauding about 40 investors of $105M. The US Securities and Exchange Commission (SEC) also has filed civil fraud charges against Strong, who is based in Philadelphia, and her Broad Reach Capital, LP (also known as the Broad Reach Fund), Broad Reach Partners, and registered investment advisor Bristol Advisors, LLC. The fund and the two entities are controlled by Strong.

According to the SEC, Smith told investors their money would go into publicly traded securities and that she would employ different trading strategies that had consistently rendered high returns in the past. Instead, contends the regulator, Smith made just a few investments using said strategies and spent investors’ funds on her own expenses, to pay back other investors, and on unrelated companies.

Smith is accused of sending out false information bragging about positive returns of more than 30% annually, claiming to hold billions of dollars in assets at a company belonging to her, creating fake documents to inflate the fund’s assets to more than $180M, and fooling investors into thinking their money was safe.